The Wells Fargo 'state of the mortgage industry' came out this week which is a perennial analysis of the mortgage industry. WF analysts Greg Reiter, Mark Fontanilla, Randy Ahlgren, and Maria Mascia came out with "The 7 housing predictions for 2015" and one of those predictions seems to take dead aim at OCWEN when they say, "Probes into the non-bank servicing sector highlighted the fact that  the legacy space is highly exposed to non-bank servicers." Wells Fargo seems to be saying that the use of their competitor is likely to end with regulators levying big fines and delaying foreclosures for what  has been described as horrible servicing tactics by many in the industry.

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Ocwen just settled for $150 Million to the New York Department of Financial Services. This comes after the other 49 states via the states attorney generals, along with the CFPB have levied up to $2.1 billion in their 'enforcement action' for deceptive practices in foreclosing on homes. Ocwen has been inflating fees, taking shortcuts, forging documents, and just generally being terrible people when it comes to servicing mortgages that are delinquent. The CFPB officially made this statement, "Ocwen is charged with engaging in unfair and deceptive acts or practices in violation of the federal Consumer Financial Protection Act and state laws. Ocwen’s unlawful conduct has resulted in injury to consumers who have had home loans serviced by Ocwen, Litton , and Homeward. The harm includes payment of improper fees and charges, unreasonable delays and expenses to obtain loss mitigation relief, and improper denial of loss mitigation relief."

Ocwen started in 1988 as "Newco" spelled backwards. It's Still run by it's founder, William Erbey, who has sparked this company off the guardrails more than a few times and has attracted a lot of regulator attention. The talented Erbey positioned Ocwen to capitalize massively from the financial crisis. The servicing rights obtained by Ocwen are a 'who's who' of failed sub-prime and Alt-A mortgage lenders. IndyMac, Lehman, Aurora Bank, Citi, Genworth, Ally, and the list goes on. Ocwen is in the business of cleaning up these messes as cheaply as possible. The critics will say that this is where the problem begins because cutting costs has meant that 60% of Ocwen's staff is based overseas and they offer little, if any, help to homeowners. A look at the structure of Ocwen may provide insight as to why they may not be helping homeowners.  

Ocwen claims they help homeowners and helping homeowners is a good business practice for Ocwen since they are paid to service loans and if a home goes to foreclosure, Ocwen would lose servicing revenue from the customer. But the states attorney General's are not buying it and neither is the CFPB. Evidently Ocwen has figured out a way to make more money by foreclosing because they opened a division called Altisource that many regulators said was a direct conflict of interest to Ocwen's customers and their lender clients. Ocwen responded to this by moving Altisource HQ to Luxemborg and providing greater separation from it's parent for the illusory sake of avoiding regulators scrutiny. However, the appearance of self-dealing remains. Altisource conveniently provides asset management, property preservation, property inspection, property valuation, etc. to be paid for by Ocwen customers who find themselves in default and the lenders who invested in their loans. It's win-win for Ocwen, but regulators don't like this arrangement very much.

It seems Wells Fargo is at least mildly amused by Ocwen to make note of non-bank servicers in their 2015 predictions. Ocwen probably enjoys some advantage that Wells Fargo envies. And Ocwen will likely remain a non-bank servicer since their last attempt at being a real bank resulted in the FDIC ordering them to sell their deposits and cease and desist in 2005. Perhaps Wells may be looking to buy servicing rights from Ocwen. This mention by Wells definitely has some raised some curiosity in the mortgage industry.